So you’ve hired a new employee. And one of their first questions is, “When will I be eligible to go on your benefits?”. You think to yourself, is it 90 days? Is the dental waiting period different than the medical? And you remember that the last time you added a new worker to the policy, the insurer charged an extra month’s premium because you didn’t know the correct effective date.
If the above scenario sounds familiar, it’s time to take control of your new hire waiting period!
What is a New Hire Waiting Period?
The new hire waiting period determines when new employees will become eligible for benefits. It can be anywhere from zero to ninety days. And contrary to popular belief, it is the employer (not the insurance company) that decides how long this wait will be. How about an example?
Let’s say that your company’s new hire waiting period is 90 days. And you hire a new worker on 04/15/2018. You might assume that the eligibility date would be 07/15/2018. But that’s not quite right. Since the insurer literally counts the days, the worker would be eligible to enroll in the benefits on 07/14/2018. That doesn’t seem like a big deal, right? After all it’s only one day. However, that one day might cost you an entire month’s premium! I’ll explain in the next section.
The 15th of the Month Premium Rule
In a nutshell, this rule states that:
- The premium for the employee is waived if they enroll on or after the 15th of the month
- However, the entire month’s premium is charged if the employee enrolls on or before the 14th
Most (but not all) insurers follow this rule. And if you don’t pay attention to new workers’ hire dates and your new hire waiting period, it’ll cost you money. To avoid this trap, many employers opt for a first of the month follow “x” days waiting period. In this scenario, new hires are always eligible on the 1st of a month. However, this strategy has its own set of complications.
The First of the Month Following “X” Days Strategy
To avoid the 15th of the month pitfall, let’s change our fictitious company’s new hire waiting period to “the 1st of Month Following 60 days”. And suppose we hire a new employee on 02/01/2018. So, when would he/she be eligible for benefits?
- First you have to add 60 days to the hire date, which brings us to 04/02/2018
- But the coverage won’t start that day. Since the waiting period is the first of the month following 60 days, the coverage would begin on 05/01/2018
Many employers find this confusing. They intuitively beleive that the employee will be eligible on 04/01/2018. Which can lead employees to think that they have coverage when they actually don’t. Clearly this is a dangerous situation that should be avoided.
Waiting Period Coordination
As a general rule of thumb, it’s best to have the same waiting period for all of your benefits. Maintaining different waiting periods for your medical, dental, vision, etc. often leads to confusion and puts an extra burden on your administrative staff. So keep it simple, and have a uniform waiting period for all of your different benefits.
So what can we learn from all of this? First, employers should realize that they choose the new hire waiting period. And your selection should be based not only on your own company’s preferences but your industry’s standard as well. For example, trucking firms tend to have short waiting periods. While the restaurant industry generally imposes longer probationary periods on new hires. Next, employers need to decide whether they want to use the First of the Month strategy or roll the dice with the 15th of the Month Premium Rule. And, don’t forget to coordinate your waiting period so that it’s the same for all lines of coverage (i.e. medical, dental, life, vision, etc.).
Most importantly, it’s crucial to have a health insurance broker who is watching out for you in these matters. For example, our firm reviews all new hire forms for each of our clients. And we alert them if any of the bad scenarios above are likely to happen. We also offer insights into the best new hire waiting period for each employer’s industry and region. Finally, we review these details each year to assure that the client’s new hire waiting period still makes sense for their needs and is inline with industry standards.
Counting days is hard! Below is a website that can help you determine the eligibility date for new employees. Before our in-house software added a similar feature, we used this website a lot. And while we never had any issues, please use the site at your own risk.